The overall market sentiment in the US was in a risk-on mode, yesterday. Once again, US tech giants drove the indices north, with the biggest gainer being Nasdaq 100, followed by the S&P 500 and the DJIA. Yesterday, the US delivered their weekly initial and continuing jobless claims, which came out mixed. In Europe, UK started off with showing its core and headline retail sales figures for the month of July on a MoM and YoY basis. Later on, several nations will be delivering their preliminary composite, manufacturing and services PMIs.
The overall market sentiment in the US was in a risk-on mode, yesterday. Once again, US tech giants drove the indices north, with the biggest gainer being Nasdaq 100, followed by the S&P 500 and the DJIA. In fact, Nasdaq 100 even managed to hit a new all-time high, reaching the 11497 mark. What’s interesting with that tech index in particular, is that it showed approximately the same performance from mid-March till yesterday, as it did roughly between August 2017 and February’s peak of 2020. In other words, the gains that Nasdaq 100 made in last 6 months are the same as the index made in a period of roughly two-and-a-half years. Either Nasdaq 100 was rising too slow between mid-2017 and February 2020, or the current upmove is way too steep. Sometimes, the greater the rise, the harder the fall. And we have already seen something similar at the end of the first quarter of this year.
It was another great day for Nasdaq 100 bulls, who managed to drive the price to a new all-time high. Looking at the cash index of Nasdaq 100, we can see that after the close, the index went a bit further north and test the area near the 11525 level. This morning, the price is correcting slightly lower. However, if it stays either above Wednesday’s high, at 11440, or above a short-term tentative upside support line taken from the low of August 11th, that may still prove positive for the near-term outlook.
As mentioned above, a small correction lower could test the aforementioned 11440 hurdle, or that upside line. If one of them remains intact, the bulls may take charge again and drive the index towards the all-time high, at 11525. If that barrier fails to withstand the bullish pressure this time and breaks, that would not only confirm a forthcoming higher high, but also place Nasdaq 100 into uncharted territory again. We might then consider a possible move to the 11600 level.
On the other hand, if the previously-mentioned upside line breaks and the price falls below the 11286 hurdle, which is an inside swing high of August 20th, that may spook the remaining bulls from the field and invite more bears. Nasdaq 100 could then slide to the 11224 obstacle, a break of which may set the stage for a move to the 11100 level, marked by the lows of August 13th and 14th.
Yesterday, the US delivered their weekly initial and continuing jobless claims, which came out mixed. There was a small decline in the number of people, who continue to receive unemployment insurance benefit. The forecast was initially at 15000k, but the actual reading showed up at 14844k. However, the amount of people, who filed for unemployment benefits for the first time was slightly on the higher side, at 1106k, against the expected 925k. Also, the US released its Philadelphia Fed manufacturing index for August, which came out below its initial forecast of 21.0, at 17.2. Although that might be seen as a negative, still, this is sitting well above zero. Let’s not forget that it could be worse. April and May readings showed up at staggering -56.6 and -43.1 respectively. These two numbers were even below the figures we saw for this indicator during the last financial crisis.
During early hours of Friday morning, Australia produced its preliminary manufacturing and services PMIs. There was no initial forecast, but we can now see that both came out below their previous readings. The manufacturing one fell only by fraction, going from 54.0 to 53.9. However, the preliminary services PMI dropped from 58.2 to 48.1, which shows that the sector is back in contraction territory.
In Europe, UK started off with showing its core and headline retail sales figures for the month of July on a MoM and YoY basis. All the figures managed to beat their initial forecasts. The headline MoM and YoY readings came out at +3.6% and +1.4% respectively, whereas the expectations were at +2.0% and +0.1%. Currently, the British pound is the best performer among its major counterparts.
Yesterday, after finding resistance near the 0.9070 barrier, EUR/GBP reversed heavily to the downside, but got halted near the 0.8969 hurdle. Today, the pair is violating that hurdle, this way confirming a forthcoming lower low. Such a move might attract more bears into the field, hence why we will examine a possible further move south, at least in the near term.
A further push south could send the rate towards the 0.8958 obstacle, a break of which might clear the path to the 0.8937 hurdle, marked by the low of July 10th. EUR/GBP could get a temporary hold-up there, or even correct back up a bit. That said, if the pair fails to get back above the 0.8969 barrier, that may result in another slide. If this time the rate drops below the 0.8937 territory, this may help drive EUR/GBP to the 0.8912 level, marked by the low of June 16th.
Alternatively, a push back above the psychological 0.9000 hurdle, marked near the low of August 14th, might open the way back to some higher areas. The pair may then drift to the 0.9028 obstacle, a break of which could set the stage for a test of the 0.9046 barrier, marked by the high of August 19th. Slightly above it runs a newly established short-term tentative downside resistance line, drawn from the high of July 27th, a which could also provide a bit of resistance for EUR/GBP.
Later on, several nations will be delivering their preliminary composite, manufacturing and services PMIs. For instance, Germany’s preliminary manufacturing PMI reading for August is believed to have ticked up from 51.0 to 52.5. The eurozone preliminary manufacturing PMI is also expected to improve, going from 51.8 to 53.0. However, eurozone’s services are forecasted to slide a bit, from 54.7 to 54.2. If we get much better than expected readings that initial expectations, this may prove to be positive for the euro, giving the common currency a bit of a push higher against its major counterparts.
Currently, there are no forecast for the UK’s preliminary composite, manufacturing and services PMIs.
Canada’s core and headline retail sales for June will be on the agenda as well. The country is expected to show a better than the previous core number, going from 10.6% to 15.0%. The headline one is believed to have risen drastically, from 18.7% to 24.5%. If the actual numbers come out as expected or above, this may help strengthen the Canadian dollar.
And finally, it will be US’ turn to deliver the same set of data. There is no forecast for the preliminary composite PMI reading, at the moment. That said, the both the manufacturing and services PMIs are believed to have improved from 50.9 to 51.8 and from 50.0 to 51.0 respectively.
In addition to the PMIs, US will release its existing home sales for the month of July, where the number is expected to have improved. The previous reading was at 4.72M, whereas the forecast is sat at 5.39M. If the actual figure comes out as expected, or even better, that will bring the indicator back to its pre-April levels.
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